Analyst: You said the reset started in 2024. When did you personally see it? Not the market data. What you saw.
Expert: Second quarter. End of Q1 maybe. Let me back up, because the sequence matters. Through '22 and most of '23 we were on allocation. Not negotiating. Being told. You'd sit down, they'd hand you a number and a volume, the volume was under what you'd asked for, and the meeting was about whether you could have more. Cost wasn't the conversation.
Analyst: And in Q2 of '24?
Expert: They started phoning us.
Analyst: That's it? That's the reset?
Expert: That's the tell. Nobody had phoned me since 2021. My assistant asked who they were.
Analyst: It's anecdote. Give me something falsifiable.
Expert: Fine. Quoted lead time. Middle of '22 we were being quoted thirty-eight, forty weeks on incremental volume. By that May the same commercial teams were inside twenty-two and offering unallocated volume. They had cells they hadn't sold, which doesn't happen in a tight market. Other thing was samples. Unsolicited B-samples from two suppliers we had no program with. When a cell maker ships you free samples he's got a line running under nameplate and somebody's bonus is attached to it.
Analyst: So you had leverage. What did you do with it?
Expert: Less than you'd think, and this is the bit I'd want written down. As a Tier 1 we mostly don't pick the cell. On most of our pack business the carmaker nominates it. They run the sourcing and they sign the long-term agreement. We buy against it, we carry the inventory, we assemble, we warrant the pack. Price exposure without price authority. I said that in a steering committee once. Went down badly.
Analyst: There's a pass-through mechanism, presumably.
Expert: There's a mechanism. Whether it functions is a different question. Lag first. The raw material component is indexed, lithium mostly, and it resets on a lag. Ours were quarterly in arrears on the buy side and half-yearly on the sell side for two programs. So when the input collapses you're paying an old high number up the chain while you're already passing a new low number down it. Two quarters of that and the delta is yours.
Analyst: You said lag first. What's second?
Expert: Floors. Nobody models the floors. During the scarcity years suppliers wrote price floors into the formula. A level the indexed portion won't go below, whatever the market does. I signed some of those myself. By late '24 they were binding on about a third of our indexed tonnage. Call it a third. Probably nearer forty per cent by the time I left, and I'd check that before you print it. Binding meaning the real price had gone through the floor and we were paying a number attached to nothing.
Analyst: What was the actual level? Give me the cell number.
Expert: Delivered into a European plant, or ex-works off a Chinese line? The gap is the whole argument.